The Impact of Townhouse to Condo Reclassification on FHA Qualified Buyers: An Inspection Company's Perspective
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In recent years, a significant number of townhome homeowners associations (HOAs) have undertaken the process of reclassifying their properties from townhomes to condominiums. While this shift might seem like a minor administrative change, it can have profound effects on buyers, particularly those who are only qualified for Federal Housing Administration (FHA) loans. We have witnessed the unfortunate scenarios where buyers go through the entire home-buying process only to discover at closing that they cannot purchase the property due to its reclassification. Understanding the Reclassification The distinction between townhomes and condominiums lies in their ownership and management structures. Townhomes typically include ownership of the individual unit and the land it sits on, while condominiums involve ownership of the interior space of the unit, with common areas and land collectively owned and managed by the HOA. The reclassification process involves changing the legal definition and